The impacts of the coronavirus restrictions have turned both the way people live and financial markets around the world on their head. Here in Australia, both the share and property markets have not been immune.
It begs the question, is now a good time to invest?
The share market
The share market in Australia reached an all-time high in February before dropping by nearly 35% in March. It has since recovered some ground (28% end of May), but is still well off the February peak.
The age-old adage when it comes to any market is to sell when the market is high and to buy when it is low. It is also often been said lately that ‘we are living in unprecedented times’. However, there have been several share market crashes over the years, including:
- Black Thursday in 1929 (which subsequently led to the Great Depression),
- Black Monday in 1987,
- the Dot Com Bubble in 2000, and
- the Global Financial Crisis in 2008.
Each time, the market recovered over time to reach a new peak. The time that it took varied in each case.
If history is any guide, the share market will recover and hit a new peak. However, that is certainly not guaranteed. The key will be how long it takes for the coronavirus to be brought under control so that all businesses can fully resume their operations.
The government is certainly keen for businesses to survive the impact of COVID-19, implementing a range of measures to help with cash flow and to encourage investment. These measures may help to cushion the impact of coronavirus and allow businesses to weather the storm. As they do, the share market is likely to recover and investors will see increased share prices and dividend returns.
The property market
Property is typically viewed as a safe haven during times of economic uncertainty. However, the effects on the market typically take longer to materialise. Initial signs are that the market prices are remaining steady, despite a drastic reduction in sales and listing activity.
The property market tends to be less volatile than the share market.
Property prices in Australia also have a long-term record of growth, even if there are shorter-term periods when prices stagnate or even fall in some markets. It is important to view property as a long-term investment (seven years or more) in order to take advantage of any upswings in the property cycle.
The bottom line
Unfortunately, no one has a crystal ball to accurately predict future investment returns. However, there are sound investment principles that you can follow to balance risk and return, including diversifying your investments and investing in assets that suit both your risk profile and financial goals.
How we can help
Our experienced financial advisors at Wilson Pateras can help you with investment advice. We’ll take the the time to understand your individual circumstances and financial goals before providing you with appropriate advice.
Contact us today for a complimentary, obligation-free consultation to find out how we can help you.
Click on the button below to download the latest Investment Market Update for June 2020.
This article contains general advice only. It does not take into account your or your business objectives, financial situation or needs. You should seek advice from a financial planner, accountant or other professional adviser before making any financial decision based on this information. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
